tv Power Lunch CNBC July 17, 2013 1:00pm-2:01pm EDT
>> b.a.c., bank of america, the most important thing that moynihan said was taking advantage of the european banks for market share, emerging market growth. buy it. >> at a multi-year high. that does it for us. don't forget to catch more "fast" tonight at 5:00. don't forget carl icahn live with me here. right now "power lunch." ben bernanke says quite a bit. markets on the move and full details. cnbc is delivering alpha. jim chanos, leon cooperman, carl icahn to name a few. this hour we have john paulson, legendary investor. it's perhaps the best lineup in financial news history, and it is only here on cnbc. plus, europe versus corporate america. it seems like there's a new case against our companies almost every day. today the europeans are zeroing in on credit -- on american credit cards in particular. tyler is at delivering alpha and he's going to join us in just a
second. simon is at the ny sze, but we begin with the man that wall street and investors all over the world were waiting to hear from. ben bernanke testifying before the house committee on financial services. the ten-year reacted this morning to that. right now it is down below the 2.5% mark. we're at 2.493%. that's significant. we've not seen that in some time. senior economics reporter steve liesman joins me with some of the details on what mr. bernanke said. >> probably a dovish bent to bernanke in that he's saying fed policy is not on a pre-set course. most of the economists who commented on this say they think the fed is on track to tapener september but a big issue is how much fiscal policy drags on the economy. bernanke came back to that several times. here's what he said in his prepared testimony. >> the risk remains that tight fiscal policy will restrain economic growth over the next few quarters by more than we currently expect or that the debate concerning other fiscal
policy issues such as the status of the debt ceiling will evolve in a way that could hamper the recovery. >> a lot of talk about that and what would happen or could happen to the economy if the congress does not raise the debt ceiling in september or later this -- or later in the fall. a lot of questions about fannie mae and freddie mac. there are some bills in congress. also questions about banking and banking reform. he was also asked about interest rates and higher interest rates and what the potential sources of those whether were and whether or not there was concern. >> there have been three reasons for it. the first is that the economic news has been a little better. for example, there was a pretty strong labor market report that cause yields to go up as investors became more optimistic. second partor is probably that some excessively risky or leveraged positions unwound in the last month or two as the federal reserve communicated about policy plans.
>> bernanke went on to say that the tightening associated with those higher rates is not welcome but said he's monitoring the mortgage market to see what the impact of higher rates is on housing. ultimately the fed's forecast is for the pickup in the economy to happen in the second half of this year. if that doesn't happen, that's when the issue of tapering in september will be on track. simon, we'll be following the july data very closely. >> okay. and obviously see what he says tomorrow and with the beige book this afternoon. let's check in with the equity market action. bob pisani is here with me. steady as she goes essentially. >> and who would have thought the move in the markets would have been from bernanke's written testimony but not the q&a. everyone was quiet and thinking that the republicans might come out swinging. didn't really half. take a look at dow jones industrial average. as simon said, steady as she goes here. not a lot of volatility. all the movement came in the bond market as they released mr. bernanke's testimony, the written testimony at 8:30 a.m., almost a ten basis point drop in
the yield and that's quite significant and that's what people felt mr. bernanke wanted to accomplish. the delivering alpha conference coming on all day today. jim chanos, noted short seller, put up caterpillar as a new short. caterpillar dropped on the news. that was 45 minutes ago and leon cooperman came out with some picks of his own including some quality growth stocks. there's caterpillar dropping and put up lee cooperments, express scripts and qualcomm and then he had growth with high income situations mentions arbor really and atlas resource partners. those stocks moving also on his comments. >> sue, back to you. >> in his testimony today mr. bernanke said the fed will start tapering this year but is not on a pre-set course to do so. what does this do? we welcome back richard magadan of jpmorgan private bank. good to see you again, richard.
>> great to see you. >> you know, talk to me about the tapering versus tightening argument that's going on on wall street. >> sure. >> how do you view it, and how is it influencing where you put your money to work? >> it's funny i was going to kid you by saying the reality is interest rates are going up. markets are already tightening, and believe it or not, bernanke is doing a brilliant job navigating de-leveraging on one side. we saw athe lot of that in may and june which people have forgotten about and signalling to people we think rates are going high. so far low end is low, credit is still cheap. high-end rates are going up, and we expect it to be a gradual step-up over the next year, year and a half. >> you still like the united states. >> yes. >> probably better than anything else around the world. is that a correct assumption? >> with the passport and paying taxes, yes. we've been over the u.s. market now for 18, 24 months. that was very controversial in january. i think people were looking a lot more into europe. we should talk about japan at some point, but the u.s. is still leading the recovery and
probably the most market and the one we own the most assets in. >> japan. >> yeah. >> you made a very interesting call on japan when no one else was interested in japan. >> yeah. i would argue that mr. abe has put in place quite a successful -- well, maybe not successful, but an aggressive and an interesting strategy going forward. >> yes. >> there's an election this sunday. >> yes? what do you want to see happen? >> i think we know what happens. >> he's likely to get the majority in the upper house of the diet and will have a majority in congress. the trick is what does he do with that? from the team's view we really had a view that structurally japan has been a currency trade so far. that's got a benefit into earnings. valuations are cheap so that will keep equity markets supported, but we want to see structural reform. what we don't want to see are consumption taxes going up, and i think the markets are going to debate that as well post-election. >> we heard from mr. moynihan of bank of america this morning saying that they are strategically trying to take market share from european banks. >> yes. >> do you find opportunities in
europe at this point? they still have a lot of structural issues. >> they do, and it's funny the banks probably have the biggest structural issues so not being cute. it isn't hard to take market share right now. >> true, very true. >> because they have bigger capital issues to deal with. >> we are seeing opportunity in europe. we've been underweight europe last year and this year. the team is doing a ton of work in terms of looking at individual sectors right now because i think they are unique stories in europe. we're trying to put together the equivalent of a recovery fund in europe where we can be very specific in individual newspapers and then sectors but it's not a market that i would still say to go out and buy as a broad market. >> very quickly on china. the direct inflow of money from big multi-nationals into china is something you highlighted in your note to clients today. >> yes. >> and you think that indicates a longer term commitment to the country. >> what's funny is the longer term commitment hasn't changed. what's surprised us and markets is how aggressive this administration is being in reform and i could make parallels on what the issues did
for the de-leveraging that we've seen in long bonds last month. inflows into china are very consistent strategically. what no one is talking about and it's even more interesting, we had $62 billion come in in fdi in china. >> foreign direct investment. >> yes, and that's the equivalent of about a 5% increase year on year. it was a 20% increase in june which is what got the headlines around it. what no one is looking at is the investment leaving china, and we've seen an increase in something like 30% of directed investment outside of china into broader asia, into europe and into the u.s. >> interesting. >> so trn is converging and evolving. it's going to be bumpy. it's going to be aggressive, but it's good for the region. >> richard magadi madigan, plea spend time with you again. >> delivering alpha, may be the best lineup in financial news history. lots of questions for you but
first the highlights from delivering alpha so far today. >> going forward, we'll measure our progress in weeks and months, not in years, and much of our remaining work will be completed in the next five months. let me repeat. by the end of this year, the core elements of the dodd/frank act will be substantially in place. >> i don't think anyone is too big to indiet. no one is too big to jail. i think, an i've been saying this for years, you know, there's enough moral hazard in the industry, and if you give people a blank check and you tell people that they have a get out of jail free card because of their size or because of their interconnectedness to the economy as an absolute matter, that's a very dangerous thing and we should never do it and we don't do it. >> i'm only up about 17 so if you take out my exorbitant fee i'm lagging a mindless index called the s&p 500. >> i wouldn't be surprised personally if the market got into a corrective mode or went sideways for a while. >> all in all i think that caterpillar, while an amazing american success story down
through the decades is going to be facing a series of super commodity headwinds, that i don't think its supporters really appreciate. >> and ty joins us now with a lot more. ty, it's been fascinating, some of the rather provocative comments that we heard earlier this morning to some of the rather interesting investment ideas that basically scott wapner had on his show. >> and you got a few of them there and a sampling from leon cooperman. if you want to be where the news-makers are making news, you want to be here today because that is the kind of morning that we've had. this place was buzzing like a forest full of krikdacicadas. right now it's more like crickets. why don't you turn and show how i've cleared the room. they are all having lunch right now and listening to john paulson, carl quintanilla will
be interviewing him in a few minutes. let me go through the highlights, treasury secretary jack lew, third year in a row for delivering alpha and third year in a row that the treasury secretary is here taking questions from our steve liesman. my takeaway is what was in the clip. anybody who thinks dodd/frank will not get done and be enforced he got it wrong. he put a timetable on it just as mr. bernanke has been putting timetable on when he's going to draw back or taper those asset purchases. he said by the end of the year, dodd/frank, don't get any ideas you won't be able to avoid, it don't get an idea that much will be repealed. it's not happening. it's the law of the land. moving on to preet bharara, you heard what he said, no one was too big to jail and he was very careful and had some criticism of the press, specifically with respect to all the speculation that's been going on on what the district attorney -- the u.s. attorney might or might not do with respect to receive cohen and s.a.c. capital.
he said don't let the number of a date on a calendar, specif specifically the lapsing of a stat stat fool you. there are lots of ways that he can find to go after wrongdoers, and he said if you've done something wrong in your past, your past is going to catch up with you eventually. it was a big shot across the bow, and basically a cautionary note. moving on quickly to some of those best ideas. you heard lee copperman talk about how he thought maybe the market would move sideways, maybe a little bit of a pullback. he had ten predictions last year. all ten of them came to pass. he's looking for lower returns in the market over the ensuing 12 months. roughly 5% to 8%. jim chanos who you just heard from. he said short caterpillar. why? because he says the global super cycle in mining and commodities is coming to an end. people may not see it yet, but it is here, and he thinks that caterpillar is overexposed there. a couple of other interesting
ideas. mark kingdon said go long japan, inc and likes toyota, fuji heavy industries and mazda. some of the top notes we've had during the day. an interesting session. yet to come john paulson across the way, and later today, as scott was talking to you on the last program, we will hear from carl icahn. i've given you pretty much all i've got, sue. the room is full of crickets. i'm going to go where the cicadas are. >> grab a little lunch because you'll be really busy this afternoon and i want you to listen in on john paulson's statements. he's making those comments during lunch and a little later during this hour, carl quintanilla interviews investor john paulson. mr. paulson had a very interesting year. that's an understatement. some of it was very good. parts of it were not so good. we'll hear from him in about 30 minutes. simon? >> okay. let's run through some. other hours this lunchtime. bank of america posting a 70%
jump in its quarterly profit held by higher stock trading and lower expenses, importantly cost control a key issue. the stock is slightly higher on the day, as you can see, but up 24% so far this year. kayla tausche has more on b of a's big day. kayla, over to you. >> still corporate news happening for you and we have it all for you. bank of america, it cut more costs and released more loan loss reserves than expect the and also posted its first post-crisis quarter that didn't see the bank's bottom line erased by pesky legal costs and managed to best its peers in some cases like mortgages and jpmorgan and citigroup, the ceo this morning said the pipeline is down only slightly and won't see the impact that its peers will. trading another boost to earnings. the best quarter for equities trading in more than two years.
big hires paid off in cash equities and thompson attributed weakness to the end of june volatility as the market tried to interpret the fed. he later made comments saying it could take up to three years to make up some losses in the industry suffered in the recent bond route. there were some thorns in the quarter. the bank made less off interest than it did last quarter and revenue every quarter was down. those issues are standard across the sector and it's hard for banks to keep turning profits but for bank of america always bigger legacy challenges there, and at least on that front it seems the psychology of investors has finally shifted. >> thank you very much. we should mention that credit card companies are down this lunchtime. the european commission says it will propose a limit of 0.2% and 0.3% on the fees that the banks charge to process debit card and credit card transactions. sue, over to you. >> two big numbers from the housing market out today. starts dropping 9.9% in june and
mortgage applications fell last week. diana olick is here to wrap it all up for us. she's live in washington. >> hey, sue. the starts were a surprise, the mortgage applications not much. applications to buy a home were up 1% week to week and down 5% in the last four weeks. refi applications were down 4% and down nearly 27% for the month, this as mortgage rates were unchanged, the average rate on the 30-year fixed 4.6% and it is down from the spike a few weeks ago but higher than the lows of early mau, and ironically rates moved lower as we got bad news on the home building front. and to that housing starts down 10%, driven mostly by a 26% drop in multi-family. single family starts were essentially flat, down under 1% for the month but up 11.5% from a year ago. permits considered a more dependable stat were up just under 1% for single family and down nearly 23% for multi-family
month to month suggesting lower starts and in the coming months ahead despite high demand. we'll talk much more about the builders coming up on "street signs" and online we'll talk about how housing confidence is still high despite these cautionary numbers. >> another reason that the bond market rallied today and the yields on the ten-year dipped 2.5%. after the break, the heat is on, and it's not just on the east coast that's getting the really hot weather. the forecast next. and more than 100,000 people in washington are on the brink of losing the water service in the midst of the heat wave. there's big news out of washington just moments ago. we'll take you there live momentarily. meanwhile out west fire is the problem. a new round of wildfires forcing evacuations. it's quite literally a fast moving wall of fryar that's now burning through the golden state. we'll take you there after the break. [ male announcer ] it's time.
. some absolutely incredible pictures coming out of california. that is a wildfire in the mountains just west of palm springs burning seven homes, sparking widespread owe vacations. some 650 fire fighters are on the scene so far. ten air tankers, 8 helicopters are helping to fight that fire, but it's hot out there, too, and execs teamly dry, and clearly that is making it a very difficult situation.
simon? >> you know, sue, we'll get the weather forecast in a moment but first let's go to prince george's county right outside washington, d.c. where 100,000 homes were on the brink of losing water right in the middle of this heat wave until something pretty unexpected happened. tracee wilkins from wrc-tv joins us live in morningside just outside of washington. welcome to the program. what is the breaking news here? >> reporter: well, what's breaking is that they were able to actually shut off a valve that had been stuck for the last day. it was because of them not being able to open that valve that they thought that they were going to have to shut off water to more than 100,000 customers. they were thinking maybe up to 150,000 people without water. let me show you where we are. we're here right across the street from andrews air force base, the president's airport here in morningside. that place was impacted. all of the businesses along the roadway across from andrews impacted. we're standing here in front of this mcdonald's because it's closed, although as you can see
from the line folks are waiting for someone to take orders but that's not happening. the county shut down businesses that use water to try and conserve. now, the good news is it looks like we won't have folks impacted by having to lose their water. they are saying that they want people to continue to conserve, to ensure that they won't have any issues here. we were talking about 3.1 miles of pipe having to be fixed. now they are saying they are looking at .8 miles of pipe having to be fixed here, significantly less, and because of that, they are saying they don't need to see all of the water shut off, but they do want people to continue to conserve just in case. good news because we're in the middle of a serious heat wave. tracee wilkins reporting live from prince george's county. >> nice to see you. thank you very much for that live report from morningside. let's get to julia martin who is at the weather channel in atlanta just to take a bird's eye view of how long this heat wave will last. julie, who will be affected. over to you. >> well, tyler, the heat wave is
relentless. it is wide-reaching, and it's going to take a pretty strong cold front and some storms to knock it out of way over the next couple of days. let's take a look now. you see this dome of hot air. we call this high pressure. it's stretching all the way from the midwest into the northeast, so we're looking at 90s today in the midwest. certainly heat advisories in places like detroit, over towards even upper wisconsin, green bay in a heat warning and also a heat advisory in the ohio valley, places like pittsburgh right on the edge of that, but here in the northeast, this is where we're seeing, again, some very unprecedented temperatures in places like new york city. you can see the 90s, but what were really have to worry about are the heat indices well up into the triple digits which goes on through tomorrow and the next day. it's really going to be the weekend before the northeast gets a break. we're looking at these excessive heat warnings and advisories all up and down the east coast. going to be one long hot miserable week here for millions of people. tyler and sue. >> julie martin there at the
weather channel, thank you. ahead on the program, they are not just for spying. now you can get your dry cleaning delivered by drones. yes, get your shirts nice and fluffy and then have them flown right to your door. most people swim away from sharks, but this guy pulls them out of the water and fights with them. >> in massachusetts his amazing store end the shark's tough defeat next. also ahead in the program, the power pitch. >> coming up, power pitch. startups give us their 60-second pitch. >> hi, my name is brian, and i'm founder and ceo of wow one day painting. >> and we give you insight into the fast-paced world of venture capital. >> now you're profitable. >> how do you get the consumer to feel comfortable? >> do these founders have what it takes more? >> are you in or out on wow one-day painting? >> stay tuned to find out. you make a great team.
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our visionary cloud infrastructure and global broadband network free you to focus on what matters. with custom communications solutions and responsive, dedicated support, we constantly evolve to meet your needs. every day of the week. centurylink® your link to what's next. a man from nantucket, massachusetts making waves all over the world with this video. he pulled that 200-pounder out of the water with his bare hands. elliot says he loves fighting with big game fish. that's a seven foot shark. granted it's a sand shark, not a killer shark, but they do sometimes bite people. i hate to judge, but respect for the fish, elliot. next time maybe throw him back. what do you reckon, sue? >> completely agree with you. poor shark.
>> extraordinary video. >> okay. gold down on the back of bernanke's testimony. prices closing in two minutes. sharon epperson is tracking the action as ever this time of the day. >> we're looking at gold prices that have faltered after getting close it that 1,300 an ounce level in the wake of bernanke's testimony. looking at the dollar gaining some ground. that's put some pressure on gold, and keep in mind gold prices seem to be consolidating as some people are saying and that seems natural that we'd also be seeing profit-taking as bernanke did not offer anything new for a lot of traders. looking at silver an copper, they are at weekly lows. copper really getting hard hit after that housing data from today and from the delivering alpha conference, simon, we're hearing from the hedge fund manager jim chanos that the psych will everyone counted on based on chinese construction, that may be nearing the end. >> thank you, sharon. let's go to the nasdaq and
bertha coombs is following the action. the big movers down there in times square. >> biggest mover is yahoo! best in the s&p today and also in the best in the nasdaq. the street a little disappointed on the guidance on the revenue and the revenue number itself for the second quarter. stock today at a five-year here. not bad way to celebrate your one-year anniversary as ceo for marisa mayer. vote due tomorrow, carl icahn slugging away. we'll hear more from him with scott wapner later. he'll say to vote against the deal with michael dell. intel slightly ahead of its earnings this afternoon, and mattel, the worst performer after it disappointed, simon. even its american girl, which has been a real strong point, disappointing on sales there. back to you. >> thank you very much. bertha coombs at the nasdaq. the yield on the ten-year at 2.5%. rick selly is tracking the action at the cme. rick? >> thanks, simon. yes, if you look at an intraday of the ten-year note yield which
many eyes are, it's hard to differentiate what percentage of the weak numbers on housing starts and permits contributed to that drop in yield which is routine on weak data versusning ben beenchingy said. many down here believe housing was a big factor. as you see on the charts since that came out it's been creeping back up. listen 5s, many five-year maturities is where the most longs are stuck. if you look at the spread between 10s and 5s the recent steepening is bailing them out. that it means simply is that the 5s are rallying better than the 10s. now, if we look at the dollar index, we can see it's stabilized, but it took a big hit, and the last chart, hyg, call this the risky tf, definitely stabilizing and moving higher and it tells me a lot about the risk appetite back in the marketplace. sue, back to you. >> okay. i'll puck it up, if i my, bob. let's bring in bob pisani for
more on the stocks. >> important thing here as we all thought there would be fireworks from mr. bernanke's q&a and that turned out not to be the case. dow jones industrial average, take a look in a very, very narrow trading range and a lot of the moves came as rick noted at 8:30 when he released his written testimony. normally not a market mover, and we saw a decline in the ten-year yield as rick pointed out. i think the important thing here is we did see some market movers throughout the day. take a look, for example, caterpillar, jim chanos at the delivering alpha conference. he's been short hewlett. that hasn't worked for him and we did see caterpillar move to the downside. a lot of talk about the weak numbers this morning in the starts numbers. much of the decline was in multi-family, and that's why you're seeing the home builders up today, not on the downside. they are not discounting it, but they are saying most of it is in the multi-family area. a couple reasons why i'm not particularly concerned about the run-up in interest rates. single family permits were at highest since may of 2008 today.
sentiment numbers were at a seven-year high and overnight really, the largest real estate company pre-announced strong earnings. take a look and you can see the stock is up. remember, that stock went public at i'm trying to remember. i believe it was $24 towards the end of last year, and you could see essentially, simon, the stock has doubled since then. 3.5% to 4% on a 30-year. a little bit of concern, but i don't think that's going to derail the housing recovery. if it goes to 6.5, now i'm worried. >> and you are the son of a builder. >> i am, and we saw interest rates mortgage rates at 17%. >> i remember. >> 17%. >> that's a long time ago. bob, thank you. have a good afternoon. sue? >> i remember it, too. it's time for our series the power pitch where innovators get 60 seconds to make their pitch and then our panel of experts decides whether they have what it takes to become the next big thing, and one of our judges today is making a big announcement. he's running for mayor of new
york city. here's the power pitch. >> i'm mandy drury, and on today's power pitch we have a company that guarantees it can paint your house in a day. brian scutamore is founder and ceo of wow one-day painting. he turns $700 and a pick yupup truck into a $100 million a year business called 1-800-got junk. but can he repeat his past success? let's take a look at his power pitch. >> hi. my name is brian scudamore and i'm the founder and ceo of wow one-day painting. 51% of americans surveyed say that the biggest obstacle in the way of painting their homes is that it takes too long. it's too disruptive. could it be done in a day? yes, it can. three years ago i met an entrepreneur with a system for painting homes in a day.
i was a consumer, and he came in with his team and painted my home, floor to ceiling, moldings and trim, speed plus quality equals wow. i partnered up with the entrepreneur and we have great suck serbs faster growth than my first brand 1-800-junk. with our partiers from san jose to washington, d.c., and the goal is 200 franchise partners over the next ten years. we'll get there by finding people who are passionate sales and marketing individuals who want to build something together rather than building it alone. the future looks brimpingt i'm excited. real painters do it in a day. oneoneday.com. >> brian is on the right side of the screen. for now he can hear us and can't react. we have real estate entrepreneur don peebles chairman and ceo of the peebles corporation with a portfolio of luxury hotels, commercial properties across the
united states and serial entrepreneur jack kitery. jack is founding member of the clinton global initiative. great to have you with us. don, what did you think about this pitch? >> i think it's got great application, by the way, both on the private sector side and for residents and also for commercial application. i have a home in the hamptons and i was looking at it yesterday and saying it needs to be painted on the exterior, but good grief, do i want them to scaffold my home two weeks in the middle of the summer when i want to enjoy it so a good application? >> what about you, jack? >> consumers in today's economy they love instant, instant gratification so i think it has that going for t.at the same time these are people's homes. people care a lot about their homes, and so the quality and quality assurance really has to be there. >> personally, as someone who has been in this situation i would love guys to come in and paint my house for one day, and i'm sure there's a lot of demand out there, but whether or not
it's a good job is obviously a question we have to pose to brian. let's talk to the man himself. brian, you'll be in the hot seat. nice to meet you. >> mice to meet you. thanks for having me here. >> we're going to ask you a few questions. first question, what would you like to ask brian? >> how do you get the consumer to feel comfortable you can deliver on time and give them a high quality product that they are going to be expecting based on it being their home? >> our biggest challenge right now is a marking challenge, not an operational challenge. it's educating the consume their speed and quality together make wow. we've got the systems in place. we paint homes all day long in a day, and the quality is -- is better than you'd often expect. >> tell me about your training program. a lot of these folks that you're going to bring in, a lot of the workers, they are not used to painting a house in one day. >> we have to have immaculate perfect training programs and we've learned that through 1-800-got-junk. this is a step-by-step process
that people go through with wow one-day university. >> would i like to ask you money and cents questions. >> how much would you bring in each month and are you profitable? >> we are profitable, a little over two years into the business. we have 21 franchise partners. we're just a marginal profit this year. it's our first profitable year. we will do $10 million in revenue systemwide at the end of this year, 75 million in revenue by the end of 2016. >> okay. now folks, you heard what brian had to say. we've got to ask whether or not are you in or out on wow one-day painting? jack? >> i think people will want this kind of service f.brian can deliver in terms of quality, quality assurance and training of the people i think is so important, i think it's going to real succeed. i'm in? >> what about you, don? in or out? >> i see two ideas here. one for residential homes and also with a growing number of homes being rented for business purposes and larger corporations doing that to get these properties back on the market by
quickly repainting them is very effective and so i'm in. i think it's a great idea. >> okay. well, i real like the fact that they are already profitable so money is not a stage at this stage and like the fact that brian has lots of experience doing this kind of thing before with his very successful 1-800-got-junk, and as you have both said, it seems like there's a lot of demand out there, i would personally hire your guys that went through your one-day university. brian, what's your reaction? >> i'm honored that three very bright people give their vote and say they are in. i think we've got an awesome business. i'm passionate about it and i see that this business will continue to grow. >> and that is the power pitch. >> okay, folks, you heard when the panelists had to say. we want to hear from you. are you in or out on wow one-day painting? cast your vote today on powerpitch.cnbc.com and join in on the twitter conversation with
the #powerpitch. and just to recap our power pitch judge, jack hitary, will announce today that he's entering the race for mayor of new york city as an independent and going up some pretty formidable adversary in that race and we wish him luck. plans to cap mastercard and visa transaction fees. is europe waging war on corporate america, and they are not just for spying anymore? how about getting your dry cleaning by a drone? it's all coming up in the power rundown next. and still ahead live from delivering alpha in new york city, carl quintanilla's big interview with investor john paulson. that's still ahead as well. back in two. if you're serious about taking your trading to a higher level, tdd#: 1-800-345-2550
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from its third generation vehicle and sales of devices to treat abnormal heart rhythms improve. it says from earlier this year, and saying with health care. two of the biggest hospitals in new york have agreed to merge in complying with obama care. the largest non-profit health system will be in the united states at continuum health. mt. sinai's ceo ken davis says the merger makes up for federal and state inability to pay for health care. experts predict the deal expands patient treatment and stream lines insurance payment. critics say it could, however, lead to much higher prices, sue, in the future. over to you. >> time will tell on that. simon, it's time for the power rundown. let's get right to t.europe's
war on american companies. in the past it was google and microsoft on antitrust. they are going after visa and mastercard right now. bob pisani, i'll start with you. what do you think? >> well, you know, if you read the testimony of people who have gotten into trouble with credit cards, you have a little bit of sympathy, and you can understand governments trying to regulate this but i'd have to come down against this, the whole nanny state concept of telling people how much debt they can get into and how much they can hand. i'm against the idea. i'm against it. >> you're against it. >> what about you, simon? >> it sounds anti-american. the europe yarns are focused much more on the consumer and too much market share. they choose to act and that's what you see time and time again. i'm not sure if the average american wouldn't want it. >> affecting american express more than visa and mastercard. >> having a much tougher
session. this may be the future of retail, guys. i'm not sure, but over in finland customers can pay for their purchases using face recognition. you just nod or blink and then you pay. the software does the rest so you don't have to carry your credit cards and don't even need cash. i don't know. kind of creeps me out a little bit. what do you think, simon? >> i think face recognition is one of the major technologies moving forward. from being able to see people on surveillance video and cross-reference it to their facebook page it will be huge but i'm not sure it would be time for payment. i could put a bob mask on and he would have to foot the bill. >> that's a scary thought. >> this may shock you, sue, i don't have a big problem with this and i'll tell you why. it's a better solution than what we have now to confirm people's identity. by the way, one of the reasons iwatch and wearable watches will become such a big thing is the biometrics component of it. it gives a way of identifying who i am by biometrics, and that also could be used as a way to
identify who you are. >> why can't you use your fingerprint. >> you can use that, too. another alternative. >> right. i think that would probably be the first step. i don't know if i could ever embrace facial recognition but we'll see. >> finally, philadelphia entrepreneur came up with a rather novel idea, that's putting it lightly, for his dry cleaning business. uses a drone to fly clothing over to customer's homes. i mean certainly it would be kind of fun, but i don't know whether longer term -- >> he has to be right behind, it what's the point? >> i guess you don't have to carry the clothes, simon? >> i love it. >> you could deliver anything, the mail, take the children to school. i guess it would be if there are too many of them. >> it's gone viral, a great gimmick. >> more seriously the faa has got to make regulations on actually how drones can be used in businesses and to the extent that they interfere with any kind of aviation traffic, certainly that's an issue, but i think it's a great story. i have a house in philadelphia and right down the street from us. all sorts of attention.
>> can have your dry cleaning delivered to you, bob. >> your clothes are so expensive, bob, you'd never trust them to a drone. >> i'd throw them away and don't even use them again. that's me. >> simon, take us to the markets. >> let's talk about the marks, up six points on the dow. we bring in ben willis from the nyse and brian battle is in chicago. brian, are you surprise that had we managed to get through the fed testimony today unscathed as a market? >> no, i think the markets took great solace in what ben bernanke said. released the text early which is unusual and the text was very dovish. they talk about the markets, hold rates low and will adjust how much quantitative easing they do buying bonds, and in all three counts ben bernanke said hey, hey, wait a minute, not doing any quantitative easing any time soon and we'll hold rates low for an extended period. that will support stock and bond markets and we're seeing that today. >> ben, would you agree given that we think they will start tapering in september? >> i think the job technique of
the central bank has worked effectively. he's managed to do without moving the needle at all using jawboning to let the market expect what will happen. nothing has changed and by the end of the year he's going to taper. what i found interesting where the market did not react -- >> ben, i've got to interrupt you. i've got to interrupt you. let's go down to delivering alpha. carl quintanilla is sitting down right now with john paulson and begin the discussion. >> you talk about how few interviews you do and more than that how few television interviews you do. have you done a television interview before? >> no, carl, this would be my first one. >> oh. >> and your last maybe, we don't know yet. >> i must admit you put together a great lineup starting with treasury secretary lew and then with preet bharara and then you had great investors from harvard, jpmorgan and great
managers so thank you for including me in this conference today. >> we'll talk about a number of things, what you like right now. i'm interested in some of the history what "forbes" has called the greatest trade ever, but just to get it out up front, for someone who made so much money when others were losing so much money, there's been a lot of scrutiny of your recent performance. how happy are you with it, and how would you characterize it in. >> we're pretty satisfied. you're right, carl. there's been a lot of deserved attention on our high returns in 2007, but we've been running our fund since 1994. we had a very good track record up until '06. 2007 we had very high returns due to the subprime mortgage short, but that was sort of over in '07. those securities had declined to almost zero by the end of the
day. it happened that we were very profitable in 2008, when most hedge funds lost money. the market was down 35%. all our funds were profitable. very little or no contribution from subprime, and then we were very profitable in 2009 and in our best year, at least in terms of absolute returns was 2010. we stumbled in 2011, and we got overly ambitious as to the direction of the market, but 2012 again, most of our funds were profitable n.2013, you know, we're having a very strong year. we get a lot of attention for the gold fund which is down because gold prices are down, but the gold fund is only 2% of our assets. the rest of our funds are all very profitable. returns so tar this year range between 5% and 32%, so we think we're, you know, back into, you know, our long-term, you know, achieving returns now, commensurate with the long-term track record. >> does it bother you that
whenever there's a headline about gold your name seems to be in the sub head line. why are you so identified with this yellow metal? >> we did -- you know, we became very concerned when the fed started qe 1 about potential loss in value. since then there's been qe2 and qe3 so the fed has printed a lot of money that didn't exist before. i think in total it's close to 300% more money than existed prior to the failure of lehman. so i and other people were looking for a currency alternative to the dollar to protect wealth in the event we get inflation. historically gold has been a very good currency alternative, excellent currency alternative in times of inflation.
what's happened currently is although the fed has printed a lot of money, to date there's very little inflation. so people that bought gold in anticipation of inflation, some of them have lost patience and that has caused the price to fall in the current environment. however, would i say that it's the rationale for owning gold is not gone away. i think the consequences of printing money over time will be inflation. it's just difficult to predict when, and we -- we're at risk for having very high rates of inflation because of the amount of money that's been printed. now, i know many people aren't concerned about it because the latest headline inflation numbers are below 2%, but i think over time that will change, so i think the rationale for owning gold is valid. i would say in the trend we're in a pause period, but overtime, as we see the economy grow, credit expand and inflation or
the indicators of inflation to start to rise, i think demand for gold will start to increase again. >> as a portfolio manager, has this trade forced you to rethink how you stop yourself out even though you believe your fundamental analysis is correct? >> well, with gold we did two things. we started a gold share class, and we created that, you know, it's completely voluntary. for our funds we gave investors opportunity to invest in dollar shares, euro shares and yen shares or gold shares, so it's completely up to the investment. we don't force it upon them, and if they are concerned about inflation, they can invest in the gold shares. i will say since we started the gold share class it has been very successful. our average cost putting on the hedge was about 950. the amount of gold in the share class has come down over the last two years, so those that took it up from the beginning
are doing very well, but gold admittedly is volatile. it always has been volatile, so i think if you -- it's very difficult to predict price movement in the short term, but if you're looking for a hedge against potential inflation in the future and have a longer term view, i continue to believe it's an important part of anyone's portfolio. >> let's talk housing. as someone who saw the cracks in u.s. real estate and mortgages, what's your view now? >> we took a long-term view. even in '06 and '07 when we looked at the housing market. we looked at housing trends over a 30-year and 50-year period and what we noticed is that housing is a cyclical area. there's periods of time when it goes up and periods of time when it goes down.
similar to the bible, seven years of feast, seven years of famine. we thought we were at a peak in 2006, and that's why we went short the housing market, and now we believe the housing market has bottomed so we wanted to go long real estate opportunities. the housing market is starting to recover. i think the latest data, it's up 12% in a year over year basis, and i think we're just at the beginning of the recovery. i would expect this recovery to continue for at least the next four, possibly seven years, so it's not too late to get involved. i still feel buying a home is the best investment any individual could make. affordability is still at an all-time high. it still costs less to own a home after tax than it does to rent and then you get -- lock in the rates with a fixed rate mortgage and then you get the benefits of appreciation, so if anyone bought a home last year, let's say for $100, you put down
$20, today that home is worth 112, so you made $12 on a $20 investment, 60% return, so obviously whether you invest in my fund or any other managers that are speaking today, you won't make returns that are that good. plus, you get to benefit by living in the home. you do each better if you put 10% down, you would be up 120%, so i'm not sure if housing prices will increase 10% every year, but it's likely over the next five years they will increase by at least 5% to 7% so there's still a lot of upside. not too late to get involved, and i'd certainly encourage anyone that's a renter to consider becoming a homeowner. and over a long period of time that's probably the best single investment anyone can make. >> you're getting exposure to this in a number of different ways. >> yes. >> let's talks about lots of land. >> one of the things we notice in a -- real estate is also cyclical, so in the, you know, after lehman failed, the all
real estate markets went down, but in looking at past recessionary cycles we realized that land prices are -- land is the segment that's hurt the most because in the downturn generally the home falls below -- the home price of new homes fall below the cost of replacement. as builders go bankrupt and banks sell homes for less than their cost so there's very little building activity, and if you were to buy a lot and build a home you couldn't recover the cost of the home so land basically has no value. so we noticed this pattern happened in the crisis we had in 1990, so we wanted to be prepared to take advantage of this opportunity this year so we set up a special real estate fund to exclusively buy entitled lots across the country. in the last cycle, the average
land, the average price for land fell about 78%, 80% from its peak value in 2006, so we set up a fund to buy lots primarily in stress situations, either from banks or as part of foreclosure situations or from builders that needed to raise cash in the growth areas of the country because you want growth eventually will absorb and will create the need for new housing and then, therefore, the need for land, so we focused our fund on arizona, california, nevada, colorado and florida. and between those states i think we're probably the largest purchaser of entitled lots, mostly developed in the recession. until we bought close to 30,000 lots, and now that the housing markets are starting to improve, the valuation of this real estate is starting to increase. we also approached the housing
recovery by securities as well. became a very large investor in different tranches but of the same mortgage securities we were short. we supported the bbb tranches, but after lehman fell and this market collapsed, a lot of the aaa tranches fell to prices around 30%, 40%, so we became a large buyer of the aaa tranches, and today it's the largest segment of our credit funds, and those securities have performed very well. and then we've also bought a stake in realagy. that's the largest residential broker in the country. they were purchased in a leveraged buyout by apollo, but their timing was off in 2007, and then we went into recession. >> about two years ago we capitalized -- >> we'll leave the john paulson interview momentarily because we have breaking news with brian
sullivan and mandy. over to you guys. >> thanks very much. stocks are up. gold is down, and we are downtown in the beige book delivering alpha wednesday. looking at the wrong camera. live with news, info and top level tips from our amazing delivering alpha conference all day long. right now breaking news on the beige book with steve liesman. >> thanks very much. brian, a beige book that in my opinion is a bit at odds with the weaker economic data. you just don't see it. the beige book a bit stronger than the economic data we've h.overall the beige book saying the economy increased at a mod toast moderate pace. manufactured which has been weak in some of the other data is said to be expanding in most districts according to the beige book, consumer spending and auto sales all increasing. we had that weak consumer spending number. seven districts report modest retail gains, new york saying it's it was soft. retailers in four districts